This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

A Wave of Protectionism? An Analysis of Economic and Political Considerations

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Philipp Maier

Additional information is available for the following registered author(s):

Abstract

In light of the U.S. current account deficit, pressure is high on Asian countries to revalue their currencies. The calls from some U.S. policymakers for tariffs on imports from China has sparked fears that this could trigger a world-wide surge in protectionism. This study evaluates the risk of protectionism, considering two dimensions: first, the economic effects of tariffs; second, the incentives for policymakers to adopt tariffs. Following the political economy literature, we distinguish 'benevolent' policymakers - who care about long-term GDP - and 'myopic' policymakers, for whom short-term considerations are important. An analysis of the economic effects using the Bank of Canada's Global Economy Model shows that the gains from import tariffs are small: in the short-term, tariffs raise the price of imports and shift consumption toward domestically-produced goods; but they also lead to a real appreciation. This improves the terms of trade, but falling export volumes lead to a reduction in GDP in the long-run. As regards the political dimension, we conclude that a 'benevolent' policymaker would not adopt tariffs, because of negative long-term economic consequences, but 'myopic' policymakers might be tempted to exploit short-term political gains. Given the potentially high costs of protectionist trade policies, protectionism is therefore rightly viewed as an important risk.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bankofcanada.ca/en/res/wp/2008/wp08-2.pdf
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by Bank of Canada in its series Working Papers with number 08-2.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 41 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bca:bocawp:08-2

Contact details of provider:
Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8899
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

Order Information:
Postal: Publications Distribution, Bank of Canada, 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Email:
Web: http://www.bank-banque-canada.ca/en/publication/pub_res.html

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: International topics; Recent economic and financial developments; Regional economic developments;

Find related papers by JEL classification:
E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cletus Coughlin & K. Alec Chrystal & Geoffrey E. Wood, 1988. "Protectionist trade policies: a survey of theory, evidence and rationale," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 12-29. [Downloadable!]
  2. Kym Anderson, 2005. "On the Virtues of Multilateral Trade Negotiations," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 414-438, December. [Downloadable!] (restricted)
  3. Rene Lalonde & Dirk Muir, 2007. "The Bank of Canada's Version of the Global Economy Model (BoC-GEM)," Technical Reports 98, Bank of Canada. [Downloadable!]
  4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  5. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Blackwell Publishing, vol. 42(2), pages 169-90, April. [Downloadable!] (restricted)
  6. Kang, In-Bong & Greene, Kenneth, 1999. " A Political Economic Analysis of Congressional Voting Patterns on NAFTA," Public Choice, Springer, vol. 98(3-4), pages 385-97, March. [Downloadable!] (restricted)
  7. Eswar Prasad & Thomas Rumbaugh & Qing Wang, 2005. "Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China," IMF Policy Discussion Papers 05/1, International Monetary Fund.
  8. Nollen, Stanley D & Iglarsh, Harvey J, 1990. " Explanations of Protectionism in International Trade Votes," Public Choice, Springer, vol. 66(2), pages 137-53, August.
  9. Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Blackwell Publishing, vol. 49(4), pages 517-31, October. [Downloadable!] (restricted)
  11. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
  12. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  13. Feenstra, Robert C, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-78, Summer. [Downloadable!] (restricted)
  14. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2005. "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing," NBER Working Papers 11583, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Howard J. Wall, 1999. "Using the gravity model to estimate the costs of protection," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 33-40. [Downloadable!]
  17. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA. [Downloadable!]
  18. Hadi Salehi Esfahani, 2005. "Searching for the (dark) forces behind protection," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 283-314, April. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? IDEAS also covers the most complete directory of Economics departments and institutes, EDIRC.

This page was last updated on 2009-11-24.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.